Google’s Nest May Profit While Saving Everyone Money
Google (NASDAQ:GOOG) (NASDAQ:GOOGL) may find a surprise source of income through its Nest acquisition that almost seems counter-intuitive. Though the purpose of Nest is to help consumers use less electricity, there may a hefty chunk of change in it for energy providers, and Nest would get a share of what the sum providers save.
Nest offers smart thermostats that are tasked with learning users’ schedules, habits, and preferences to optimize the heating and air conditioning use and reduce energy bills. The benefit for consumers is obvious: less money going to energy companies, more money staying in the bank. On its website, Nest claims that it can save as much as 20 percent on heating and cooling bills with auto-scheduling feature, which turns heating or cooling on and off through out the day depends on when users tend to be in or out of the house.
The question is how Nest can benefit electricity providers. According to Forbes, Nest has the ability to make work a lot easier for energy providers when it comes to high-demand times, like a blazing summer afternoon when everyone decides to kick on the air conditioning at the same time. If providers work with Nest, they can see thermostats turned down during the peak demand times to decrease the burden of supplying all that energy.
By reducing the overwhelming demand, energy providers aren’t forced to rely on extra, less efficient power plants to boost the supply and meet demand. If they could rely only on their most efficient power plants, it would not only be beneficial in terms of power generation, but could also reduce overhead, as the extra plants could eventually be closed.
Nest founder Tony Fadell claimed last spring that “according to data from the Consortium for Energy Efficiency and Pike Research, in 2011, energy companies allocated approximately $9 billion to energy efficiency and peak-reduction programs.” That $9 billion is what Nest could be targeting with its Rush Hour Rewards plan. Forbes‘s estimate for the value of doing lowering consumers energy use during peak hours in just 1 percent of U.S. households is $100 million to Nest.
Through the service, consumers save money by reducing their energy use — either by simply having the smart thermostat control heating and cooling as necessary, or by getting rewards for using the Rush Hour Rewards service. The energy providers benefit as well, by being less reliant on extra, less-efficient energy production means to meet high demand. And Nest benefits from sales to consumers and by taking a piece of the pie in savings from energy providers — according to Forbes, Fadell expects the services revenue to end up trumping the hardware as time goes on.
Considering that the savings get passed around on all sides, it almost seems like a win-win-win situation. But, of course it is still a matter of adoption. Nest is still a niche product, as not every American is jumping up and down to turn his or her house into a smart-home. In addition to that, not every energy provider will decide to make a deal with Nest.
Though the numbers add up, this could be another push into smart technology that doesn’t pan out. The push into smartwatches hasn’t hit its prime yet, and connected cars are starting to get a started. As a bigger web gets built, the time for smart homes might come around. Until then, it will be a question of whether Google’s Nest can find enough business to last.
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